Monday, November 8, 2010

False Social Security Numbers and Identity Theft Cost American Taxpayers Over 300 Million Dollars a Year!

In another egregious example of fraud that affects us all, The Treasury Inspector General (TIGTA) released the figures today for the fraud related to people who use false Social Security Numbers, or duplicate Taxpayer Identification Numbers.

Everyone that files a tax return must use a Social Security Number (or Tax ID number). For the majority of filers, the Tax ID Number is the individual’s Social Security Number. A Social Security Number cannot be used on more than one tax return per year. However, identity thieves, scammers, and fraudsters often file tax returns using other people's Social Security numbers, in order to receive false refunds.

This is a widespread problem, and leads to a huge amount of govenment fraud.

TIGTA estimates that individuals inappropriately received at least $380 million in tax credits in TY 2007 as a result of this fraud. A large portion of this ends up being false refunds, paid out to people that are gaming the system by using other's Social Security Numbers.

TIGTA identified false TINs were used on over 3.2 million tax returns in 2007. Over five years, erroneous exemptions and credits could exceed $1.9 billion. Almost 2 billion dollars!

The solution is simple-- when the IRS discovers that someone is using multiple Social Security Numbers, then a notice should go out immediately. The taxpayer needs to be notified that his or her Social Security Number is being used by others. In addition, the IRS should establish processes to recover the tax refunds that were erroneously paid to fraudsters who used a stolen TIN. Of course, some of these are honest errors, such as someone simply keying in the wrong number. But the majority of these instances are fraudulent, pure and simple.

The IRS response to the TIGTA report was lukewarm, at best. In its response, The IRS did not agree to expand the issuance of notices to individuals involved with multiple TIN uses. In addition, the IRS did not agree to expand its processes to recover erroneous refunds resulting from an ITIN.

Why not? Why isn't the IRS doing more to stop this type of fraud? The amount recovered by simply addressing this problem could save the IRS and individual taxpayers millions of dollars, and also help curb the rampant crime of identity theft.

The IRS needs to work with law enforcement and with taxpayers to help solve this problem, which is growing every single year. Another example of government waste that has an easy solution, if the government would just get off their high horse and fix it!

Jaime Rojas, Jr.

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